EMPLOYMENT ACT 2002: STATUTORY DISPUTE RESOLUTION
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1 EMPLOYMENT ACT 2002: STATUTORY DISPUTE RESOLUTION This article first appeared in Employment Law & Litigation volume 7 issue The Employment Act 2002 (EA 2002) introduces a new compulsory system for resolving disputes in the workplace. According to paragraph 86 of the Explanatory Notes to the EA 2002 a large proportion of complaints to employment tribunals involve employers without any internal disputes procedures. Many occur where employers or applicants have failed to use whatever procedures exist. Litigation to resolve employment disputes is costly and can often weaken employment relations and the employability of applicant workers. The provisions in the Act aim to encourage parties to avoid litigation by resolving differences through the proper use of internal procedures. They will, in effect, require all employers to have minimum procedures and give incentives to both employer and employees to use them. The core elements of the EA 2002 are: statutory dismissal and disciplinary procedures (DDPs) which, if the employer does not follow, renders a dismissal automatically unfair; statutory grievance procedure (GPs) which, if the employee does not invoke, may prevent him/her presenting a claim in the employment tribunal; an implied term in every contract of employment requiring both parties to comply with the minimum procedures, which cannot be contracted of (section 30); a requirement that DDPs are set out in employee s written particulars of employment which, if the employer fails to provide, could result in additional compensation to an employee; increasing or reducing tribunal awards to reflect (non-)compliance with workplace dispute resolution procedures (section 31); The new law is contained in Part 3 of the EA 2002, but much of the detail is to be covered by regulations. The regulations are unlikely to be in force until late Notably the statutory procedures only apply to employees and not workers (section 40). Dismissal and disciplinary procedures Part 1 of Schedule 2 to the EA 2002 provides for two forms of statutory disciplinary procedure: the standard procedure this is to be used in all circumstances, including individual redundancies, unless the modified procedure applies; the modified procedure a short-form procedure designed to be used when summary dismissal has already occurred. Standard dismissal and disciplinary procedure Step 1: statement of grounds for action and invitation to meeting
2 1(1) The employer must set out in writing the employee s alleged conduct or characteristics, or other circumstances, which lead him to contemplate dismissing or taking disciplinary against the employee. 1(2) The employer must send the statement or a copy of it to the employee and invite the employee to attend a meeting to discuss the matter. Step 2: meeting 2(1) The meeting must take place before action is taken, except in the case where the disciplinary action consists of suspension. 2(2) The meeting must not take place unless- the employer has informed the employee what the basis was for including in the statement under paragraph 1(1) the ground or grounds given in it, and the employee has had a reasonable opportunity to consider his response to that information. 2(3) The employee must take all reasonable steps to attend the meeting. 2(4) After the meeting, the employer must inform the employee of his decision and notify him of the right to appeal against the decision if he is not satisfied with it. Step 3: appeal 3(1) If the employee does wish to appeal, he must inform the employer. 3(2) If the employee informs the employer of his wish to appeal, the employer must invite him to attend a further meeting. 3(3) The employee must take all reasonable steps to attend the meeting. 3(4) The appeal meeting need not take place before the dismissal or disciplinary action takes effect. 3(5) After the appeal meeting, the employer must inform the employee of his final decision. Modified dismissal and disciplinary procedure Step 1: statement of grounds for action 4 The employer must set out in writing: (i) (ii) (iii) the employee s alleged misconduct which has led to the dismissal; what the basis was for thinking at the time of the dismissal that the employee was guilty of the alleged misconduct; and the employee s right to appeal against dismissal; and send the statement or a copy of it to the employee. Step 2: appeal 5(1) If the employee does wish to appeal, he must inform the employer.
3 5(2) If the employee informs the employer of his wish to appeal, the employer must invite him to attend a meeting. 5(3) The employee must take all reasonable steps to attend the meeting. 5(4) After the appeal meeting, the employer must inform the employee of his final decision. Statutory grievance procedure Part 2 of Schedule 2 to the EA 2002 provides for two forms of statutory grievance procedure: the standard procedure this is to be used in all circumstances, unless the modified procedure applies; the modified procedure a short-form procedure designed to be used after termination of employment, eg where an employee believes that s/he has not received their correct holiday pay or statutory redundancy payment. Standard procedure Step 1: Statement of Grievance 6 The employee must set out the grievance in writing and send the statement or a copy of it to the employer. Step 2: meeting 7(1) The employer must invite the employee to attend a meeting to discuss the grievance. 7(2) The meeting must not take place unless the employee has informed the employer what the basis for the grievance was when he made the statement under paragraph 6; and the employer has had a reasonable opportunity to consider his response to that information. 7(3) The employee must take all reasonable steps to attend the meeting. 7(4) After the meeting, the employer must inform the employee of his decision as to his response to the grievance and notify him of the right to appeal against the decision if he is not satisfied with it. Step 3: appeal 8(1) If the employee does wish to appeal, he must inform the employer. 8(2) If the employee informs the employer of his wish to appeal, the employer must invite him to attend a further meeting. 8(3) The employee must take all reasonable steps to attend the meeting. 8(4) After the appeal meeting, the employer must inform the employee of his final decision. Modified procedure
4 Step 1: statement of grievance 9 The employee must set out in writing: (i) (ii) the grievance, and the basis for it, and send the statement or a copy of it to the employer. Step 2: response 10 The employer must set out his response in writing and send the statement or a copy of it to the employee. The EA 2002 contains no definition of what constitutes a grievance. The ACAS Code of Practice on Disciplinary and Grievance Procedures defines grievance as a problem or concern about [the employee s] work. Whether this definition is adopted will be left for the regulations. General Requirements Part 3 of Schedule 2 to the EA 2002 provides general provisions that apply to all statutory procedures: Introductory 11 The following requirements apply to each of the procedures set out above (so far as applicable). Timetable 12 Each step and action under the procedure must be taken without unreasonable delay. Meetings 13(1) Timing and location of meetings must be reasonable. 13(2) Meetings must be conducted in a manner that enables both employer and employee to explain their cases. 13(3) In the case of appeal meetings which are not the first meeting, the employer should, as far as is reasonably practicable, be represented by a more senior manager than attended the first meeting (unless the most senior manager attended that meeting). The EA 2002 does not provide any guidance as to what is reasonable and unless the Secretary of State amends the general requirements it will be left to employment tribunals to determine what is reasonable. Right to be accompanied Paragraph 14 of Schedule 2 to the EA 2002 provides that a meeting for the purposes of the statutory procedures is a hearing within section 10 of the Employment Relations Act Whistleblowing
5 Paragraph 15 of Schedule 2 to the EA 2002 is aimed at ensuring that GPs do not restrict the manner in which employees can make protected disclosures within the public interest disclosure provisions of Part IVA of the ERA Statutory procedures The EA 2002 does not lay down specific circumstances, which will trigger an obligation to invoke either the DDP or GP. Again the details will be in the regulations. Claims affected Failure to follow a DDP or GP may result in sanctions against the non-compliant party in the following: Schedule 4: Tribunal jurisdictions to which section 32 applies Section 2 of the Equal Pay Act 1970 (equality clauses). Section 63 of the Sex Discrimination Act 1975 (discrimination in employment). Section 54 of the Race Relations Act 1976 (discrimination in employment). Section 146 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRA 1992) (detriment in relation to trade union membership and activities). Paragraph 156 of Schedule A1 to TULRA 1992 (detriment in relation to union recognition rights). Section 8 of the Disability Discrimination Act 1995 (discrimination in employment). Section 23 of the ERA 1996 (unauthorised deductions and payments). Section 48 of the ERA 1996 (detriment in employment). Section of the ERA 1996 (unfair dismissal). Section 163 of the ERA 1996 (redundancy payments). Section 24 of the National Minimum Wage Act 1998 (detriment in relation to minimum wage). Schedule 3 Tax Credits Act 1999 (detriment in relation to tax credits). Regulation 30 of the Working Time Regulations 1998 (breach of regulations). Regulation 32 of the Transnational Information and Consultation of Employees Regulations 1999 (detriment relating to European Works Councils). Schedule 3: Tribunal jurisdictions to which section 31 applies The jurisdictions contained in Schedule 4 and in addition: Employment Tribunal Extension of Jurisdiction (England and Wales) Order 1994 SI 1994/1623 (breach of employment on termination). Employment Tribunal Extension of Jurisdiction (Scotland) Order 1994 SI 1994/1624 (corresponding provision for Scotland). Time limits admissibility of claims Section 32(2) of the EA 2002 provides that an employee who is under an obligation to use a GP shall not present a complaint to an employment tribunal under any jurisdictions listed in schedule 4 arising from the subject matter, which the grievance relates unless s/he has complies with Step 1 of the relevant GP. Moreover, even if the employee has done this; no claim can be presented until 28 days after the date on which Step 1 was done (section 32(3)). A number of problems have been identified with this minimum 28-day period, during which an employee cannot present a tribunal claim: it continues to apply even after the employer has rejected the claim, or if the employer has failed to respond at all, so that an employee might be left in limbo waiting for the 28 days to expire. The government has indicated an intention to introduce regulations shortening the 28- day period to 7 days if, within those 7 days, the employer has either rejected the grievance outright or failed to respond;
6 for the purpose of calculating the 28-day period, it is unclear whether time starts from the date the employee posts his grievance letter, or the date the employer receives it. This is a crucial distinction, because it could result in an IT1 being presented too early or too late; there is a possibility that the 28-day prohibition on presenting a tribunal claim may contravene EC law, because an employee might be forced to endure discrimination or harassment for 28 days before being able to seek an effective remedy in law. An employee will be further barred from bring a claim even though s/he has sent a Step 1 letter, where Step 1 was progressed more than one month after the end of the statutory time limit for presenting the complaint (section 32(4)). The Secretary of State has the power to amend the list of debarred complaints in specified circumstances by issuing regulations (section 32(5)). The government has stated that it will be bringing in regulations to provide that the admissibility regime will not apply to former employees, eg those claiming to have been unfairly dismissed, unless constructive dismissal is being claimed. Compensation Section 31 of the EA 2002 provides that, where an employment tribunal complaint falls within the jurisdiction listed in Schedule 3 to the EA 2002, then any compensation award is to be adjusted if the statutory procedures apply but have not been followed. If an employer or an employee fails to comply with the new statutory disciplinary procedure, then the tribunal must increase any award which it makes to the employee by 10% and may, if it considers it just and equitable, increase it by a further amount up to 50% (section 31(2)). However, where there are exceptional circumstances a tribunal is not obliged to make any increase to the award. There is no definition in the EA 2002 of exceptional and this will be left to the discretion of the employment tribunal. The percentage increase occurs before any reduction to the compensatory award for contributory fault (but not before any similar reduction to the basic award) and before the imposition of the statutory cap on the compensatory award (new section 124A of the ERA 1996, inserted by section 39 of the EA 2002). Therefore, it remains the case that a tribunal cannot exceed the statutory maximum for a compensatory award, currently 52,600. In addition, a flat sum of 4 weeks pay is payable to an employee if the dismissal is automatically unfair because of failure to comply with the statutory disciplinary procedure. This sum is deducted from any compensatory award (new sections 112(5) and 123(8) of the ERA 1996, inserted by section 34 of the EA 2002), and so is unlikely to make any difference in practice unless the compensatory award already exceeds the maximum. Paragraph 40 of Schedule 7 to the EA 2002 repeals section 127A of the ERA 1996 (introduced by the Employment Relations Act 1999), which provided a fixed reduction or increase to the compensatory award of up to 2 weeks pay if the employer or employee failed to use a contractual appeal procedure. It will not always be mandatory for employees to follow the procedure. For example, the government has indicated that the forthcoming regulations will provide that individuals do not need to bring formal grievances if a trade union is pursuing a collective dispute on behalf of a number of individuals. Full details of the exceptions are awaited in the regulations. Unfair dismissal Failure to follow either a DDP or GP will render a dismissal is automatically unfair. No question of reasonableness will arise the dismissal is deemed to be unfair under the new section 98A of the ERA 1996, as amended by section 34 of the EA However, an employee will still need to have accrued one year s continuity of employment to claim unfair dismissal: this is not an exception to the one-year qualifying period.
7 Conversely just because an employer has complied with the statutory disciplinary procedure, will not make the dismissal automatically fair. The dismissal may still be unfair, eg because no reasonable employer had reasonable grounds to believe that such misconduct had taken place (the Burchell test) or because dismissal was outside the range of reasonable responses (the Iceland v Frozen Foods test). What if the employer has complied with the statutory disciplinary procedure, but there are still procedural errors or unfairness? The new section 98A(2) of the ERA 1996 provides that failure to follow a procedure other than the statutory dismissal procedure will not render the dismissal unfair if the employer shows he would have dismissed the employee if he had followed the procedure. An employment tribunal will therefore decide (on a balance of probabilities) what would have happened if the employer had complied with the more comprehensive procedure. To this end, the rule in Polkey v AE Dayton Services [1988] AC 344 HL is changed: the question now is whether full adherence with the procedure would have made a difference, not (as previously) whether it was futile. Employees who are dismissed shortly before the expiry of the one year qualifying period will be able to argue that failure to comply with the DDP, deprived them of the loss of chance to claim unfair dismissal, in accordance with the principle in Raspin v United New Shops [1999] IRLR 9 EAT. Comment The detail to Part 2 of the EA 2002 will be for the most part can be found in the regulations. Marc Jones, Partner For further information, please contact: Marc Jones Partner, Employment Department TURBERVILLES direct dial direct fax marc.jones@turbervilles.co.uk The material contained in this fact sheet is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken. Back to the top
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